Unemployment Insurance, The Market Failure Analysis, And Efficiency

As an important segment of the National Social Security System, Unemployment Insurance performs a positive role in ensuring social stabilization and economic developing persistence. It helps the individuals to defend the potential risks of unemployment and eliminate the uncertainty of income, so as to improve people's well-being situation.However, even though Unemployment Insurance can eliminate the market Failure to a certain extent, itself has the problem of "Market Failure": unemployment insurance is hard to be provided by the market. Since the first Unemployment Insurance System was ever established in France in 1905, all the Unemployment Insurance Systems through out the world are run by each country. There is hardly such a system being privately run. The first Chapter of this dissertation will adopt the theory of Information Asymmetry in the Economics to demonstrate that unemployment, being an "uninsurable" risk, cannot be effectively insured through private insurance market due to factors of "Adverse Selection", "Moral Hazards", etc.Nevertheless, in terms of the social stabilization and income distribution, the society needs Unemployment Insurance to create a channel of income re-distribution for those unemployed. Thus the responsibility of providing Unemployment Insurance should eventually shouldered by the Government. The second Chapter of this dissertation will have a systematical discussion on Public Unemployment Insurance Systems in western countries, including the modes, coverage areas, funding resources, qualification conditions and standards and terms of payment. The Chapter will also introduce the system operating situations in major countries. Through the comparison of the allowanced voluntary Unemployment Insurance in Sweden and the compulsory Unemployment Insurance in the USA, the Chapter will present that there is no uniform mode for Unemployment Insurance System all around the world. Even under the same mode, different countries vary on objectives and means of organization due to different situation of a country. Yet no matter what kind of mode or means of organization has been adopted, the "Moral Hazards" will not be completely removed even by the Government's participation and the compulsion to insure. Therefore, almost all the countries ever established Unemployment Insurance need to provide financial subsidies to their Unemployment Insurance Fund. Despite many rewarding innovations on the Unemployment Insurance by western countries in the recent several years and improvement on the "Economic Efficiency" in several countries, the Public Unemployment Insurance is doomed to be with low efficiency due to its inherent defects. Where there is Market Failure, there is Government Failure.The third Chapter will mainly discuss what inspirations China can absorb from Unemployment Insurance Systems in western countries. Compared with the western developed countries, China's Unemployment Insurance System is with short history, narrow coverage, less funding channels and low benefit level, which are all far behind the demands of the Marketing Economics development. Especially the current period of time is for Economic System Transference and State-owned Enterprises' Revolution, which leads to a rapid increase of unemployment rate. Therefore, it is urgent for China to complete and improve thecurrent Unemployment Insurance System. We need to use western countries' experience for reference, enlarge the coverage area of the system gradually, standardize the fund collection, explore the funding channels, improve the insurance benefit level and effectively combine the unemployment subsidy with the re-employment trainings, so as to try to form an Unemployment Insurance System giving both attention to the re-employment trainings and the unemployed people's basic living needs.